Capped drawdown squeeze as GAD rate hits record low

Retirees' capped drawdown incomes will be squeezed further as December's GAD rate dropped to a record low.

The gilt yield index plummeted to 2.58%, rounded to 2.5% for next month's drawdown calculations.

Hornbuckle Mitchell director Mary Stewart said: "The continuing economic uncertainty pushing up gilt prices means tough times for drawdown investors. Falling yields puts downward pressure on the income that can be taken."

According to the company's calculations, a 65-year-old man with a £100k pension fund would now draw a maximum of £5,600 a year from the fund. This compares to £8,400 in March before GAD rate reforms were implemented.

"Some people already in drawdown are likely to be facing a severe income squeeze if they have reviews next month," Stewart said. "Once locked in, they have to wait at least a year before requesting another review."